Saturday, 25 March 2017

Whether Mala fides can be inferred from undisputed facts?

It is well settled that use of power for a purpose
different from the one for which power is conferred is
colourable exercise of power. Statutory and public power is
trust and the authority on whom such power is conferred is
accountable for its exercise. Fraud on power voids the action
of the authority .State of Punjab v. Gurdial Singh (1980) 2 SCC 417, Greater Noida Industrial Development Authority v. Devendra Kumar (2011) 12 SCC 375, para 39
 Mala fides can be inferred from
undisputed facts even without naming a particular officer and
even without positive evidence.  State of Punjab v. Ramjilal (1970) 3 SCC 602, pr 9-10; Express Newspapers (P) Ltd. V. UOI
xx(1986) 1 SCC 133, pr. 119-120
(ARISING OUT OF SLP (Civil) NO.5455 OF 2014)
Citation: (2016) 11 SCC378

1. Leave granted. Principal question which has fallen for
consideration is whether the power of the State to acquire
land for a public purpose has been used in the present case
to facilitate transfer of title of the land of original owners to a
private builder to advance the business interest of the said
builder which is not legally permissible. Further question is
whether on admitted facts, the acquisition of land is entirely
or partly for a private company without following the
statutory procedure for the said purpose. Further question is
how in the facts and circumstances relief could be moulded.
2. Vide notification dated 11th April, 2002, 850.88 acres of
land was proposed to be acquired for residential/commercial
Sector 27-28, Rohtak, Haryana by the Haryana Urban
Development Authority under the Haryana Urban
Development Authority Act, 1977 (‘the 1977 Act’). However,
the final notification dated 8th April, 2003 under Section 6 of
the Land Acquisition Act, 1894 (‘the 1894 Act’), according to

the impugned order of the High Court, was in respect of
441.11 acres. Award dated 6th April, 2005 was for 422.44
acres. Appellant –Uddar Gagan Properties Limited (‘the
Builder’) who is a Builder-cum-Developer entered into
collaboration agreements with some of the farmers – owners
whose land was under acquisition on 02nd March, 2005 for
development of a Colony in accordance with the Haryana
Development and Regulation of Urban Areas Act, 1975(‘the
1975 Act’). The Builder made applications on and around 21st
March, 2005 to the Director, Town and Country Planning,
Chandigarh, Haryana for grant of licence to develop a colony
on land covering about 280 acres. The licences were granted
on and around 12th June, 2006 and corresponding land was
released from acquisition. The licences were addressed to
the owners but remitted to the builder. This was followed by
execution of sale deeds in favour of the builder through
power of attorney holder of the land owners.
3. It was on these undisputed facts that the High Court
was called upon to examine the questions on a group of
petition/s by the land owners which are framed in the
impugned judgment as follows :-
3Page 4
[i] Whether the object behind the subject-acquisition
was to achieve a bona-fide public purpose or to use
it as a cloak for the private benefit of
[ii] Whether the power of 'eminent domain' has been
exercised in violation of Articles 14, 21 and 300-A of
the Constitution?
[iii] Whether it is lawful to enter into 'Agreement to
Sell' or 'Collaboration Agreement' in respect of the
land under acquisition and can an instrument of sale
be executed in respect of such land?
[iv] Whether a writ court in exercise of its powers
under Article 226 of the Constitution is competent to
annul a sale-transaction executed in violation of and
on playing a fraud on the Statute?
[v] Whether the orders granting Licenses or releasing
the acquired land have been passed in favour of 11th
respondent in accordance with provisions of 1975
State Act?
[vi] Whether the petitioners have got locus standi to
challenge the 'licences' or the orders of release of
the acquired land in favour of respondent No. 11?
[vii] Whether writ petitions suffer from inordinate
delay and latches?”
4. It was held that in view of the scheme of the 1977 Act,
the notified public purpose for acquisition was covered by
Section 3(f)(ii) and (iv) of the 1894 Act, but the events
following the notification for acquisition unfolded different
story. After receipt of notices by the land owners under
Section 9 of the 1894 Act, calling upon them to appear before
the Collector for determination of compensation, the builder
suddenly surfaced in March, 2005 and applied for grant of
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licences for setting up colony on the land covered by the
notification and paid full sale consideration to the land
owners. The Government files deceptively projected the
initiative to release land at the instance of farmers and
owners while the real fact was to transfer the title of land to
the builder. Factual matrix based on record noticed in the
judgment of the High Court is as follows :-
“[60]. Awards No. 1, 2 and 3 were admittedly passed
on 06th April, 2005 i.e. a day before the expiry of the
statutory period of two years. As per the categoric
stand taken by the Land Acquisition Collector in the
written statement initially filed, he took over the
possession of land and handed-over it to the Estate
Officer, HUDA, Rohtak on that very day, i.e., 06th
April, 2005. The official record also substantiates this
plea of the respondents. On doing so, the acquired
land stood vested absolutely in the State
Government, free from all encumbrances by virtue of
Section 16 of the 1894 Act.
xxx xxx
[62]. The Government Files pertaining to the grant of
licence or release of land in favour of 11th
respondent have been deceptively captioned as if
the entire initiative to seek the release of land is at
the instance of the farmer–owners of the acquired
land. That very record, however, falsifies this facade.
The application dated 21st March, 2005 [receipt No.
2461] is on the letter-head of respondent No. 11. It is
signed by one of its Directors. Form 'LC-I', however,
earlier thumb impressions of previous owners along
with the attested copies of 'Power of Attorney' and
'Collaboration Agreements' executed by them in
favour of respondent No. 11. The Application Forms
refer to deposits of demand drafts of lacs of rupees.
Who paid that requisite fee or statutory charges?
5Page 6
Was it by the farmers whose land already stood
acquired and who had not received even a single
penny of compensation? OR was it deposited by
respondent No. 11? The copies of Demand Drafts
answer this query as every penny was deposited by
respondent No. 11 only. The illiterate or
semi-illiterate farmers had no knowledge except that
their land was under acquisition and there was a
Builder willing to pay them a price which was much
more than the Government compensation.
[63]. It is quite unfortunate and misleading that
every relevant Government file recites, say for
example, that “Shri Surat Singh and other individuals
have submitted request on LC-I for setting up of
Residential Plotted Colony over an area measuring
84.04 Acres....... the applicants have deposited an
amount of '`34,09140/- towards Scrutiny Fee and
`42,02000/- towards Licence Fee'. The said
application was dealt with first time vide office note
dated 19th August, 2005 yet no where it is disclosed
that the land had already been acquired, award
passed and it stood vested in the State free from all
encumbrances. In the subsequent notings, the
so-called 'applicants' disappeared and all the Officers
starting from the District Town Planner onwards,
have worked over-board to contribute in favour of
the claim of 11th respondent.”
5. It was concluded :-
“[69]. From the facts noticed above, there can be no
different conclusion but to infer that though the
proposal to acquire land for the development of
Urban Sectors at Rohtak was mooted, approved and
was taken to a logical conclusion for a bona-fide
public purpose. However, during the interregnum
and before passing the Award, an unholy nexus to
promote the private interest of respondent No. 11
sprouted which de-railed the public purpose of
acquisition and led to the misuse of power under
Section 48 of the 1894 Act. Respondent No. 11
exploited the moments of suspense and succeeded
6Page 7
in entering into distress-sale agreements with the
desperate owners who were sandwiched and had no
other choice but to give in for a comparatively better
[70]. To say that the landowners entered into varied
contracts with Respondent No.11 voluntarily,
willingly or without undue pressure is too farcical to
be believed. There is a natural and conventional
bondage between the land and its tiller. A farmer
seldom sells the land save for the compelling
reasons. Agricultural being their only source of
survival, the loss of land is a terrible nightmare for
any farmer. The Land Acquisition Collectors never
assess the compensation as per actual market value
of the land and the only yardstick to be followed is
the Collector's rate fixed for the purpose of
registration charges. The farmer can not sell the land
in open market as on issuance of Section 4
notification all sale transactions are invariably
banned. These moments of fear and anxiety must
have prompted respondent No. 11 to indulge in the
best bargain. For the farmers the offer was like
'better you give the wool than the whole sheep'.
There was no free trade for the farmers. Their choice
was limited : to accept the State compensation at
the Collector's rate or a better offer given by State
sponsored private builder. There was inequality of
bargaining power. The determination of land value
was not at all in the control of farmers. They were
gropping in the dark. They had no clue that the land
will be released. They accepted the unreasonable
and unfair unilateral terms and lost their land.
[71]. The sale price of the land was determined by
respondent No. 11 and not by the market forces.
Given a choice between retaining their land or selling
it to the Builder for the offered-price, not a single
farmer would have agreed to sell it. The
circumstances forced the landowners to accede to
the offer made by 11th respondent made. It is a
proven case of unconscionable bargain exerted
through undue influence and fraud, both. The sample
'agreements' on record truly reveal that
illiterate/semi-literate farmers were asked to sign the
7Page 8
documents on dotted-lines forcing them to sell out
most of their ancestral holdings. The en-mass
'Agreements' conclusively belie the plea of
need-based bona-fide sales. How the Courts should
deal with the unconscionable contracts which are
injurious to public good and
public interest, has been eloquently answered by the
Supreme Court in Central Inland Water Transport
Corporation Limited & Anr. Vs. Brojo Nath Ganguly &
Anr. [1986] 3 SCC, 156 saying that
“......Article 14 of the Constitution guarantees to all
persons equality before the law and the equal
protection of laws........This principle is that the
courts will not enforce and will, when called upon to
do so, strike down an unfair and unreasonable
contract, or an unfair and unreasonable clause in a
contract, entered into between parties who are not
equal in bargaining power......For instance, the above
principle will apply where the inequality of
bargaining power is the result of the great disparity
in the economic strength of the contracting
parties.........It will also apply where a man has no
choice or rather no meaningful choice, but to give his
assent to a contract or to sign on the dotted line in a
prescribed or standard form or to accept a set of
rules as part of the contract, however unfair,
unreasonable and unconscionable a clause in that
contract or form or rules may be.....”.
[72]. If there were good and justifiable reasons,
though conspicuously missing from the record, for
not proceeding with the subject-acquisition, the
State Government as a guardian of people's rights
could shelve off its previous plan to develop Sector
27-28 at Rohtak through the State agency and
release the land to its owners. It, however, did not do
so. Rather, the State unleashed the threat of its
mighty power under the ruse of eminent domain and
created a psycho-fear in the mind of poor farmers
that they would, if did not agree, lose the land and
its value both.
[73]. We may now also deal with yet another
vigorously argued plea that the land was as a matter
of fact released from acquisition or most of the
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licences were granted to respondent No. 11 under
the directions of this Court. The official respondents
in the written statements have repeatedly referred
to CWP Nos. 14451 to 14453 of 2010 which were
allowed by a learned Single Judge on 06th December,
2010 directing the State and its authorities to extend
the benefit of Section 48 of the 1894 Act to the
landowners and grant them licences. It is pertinent
to mention that while CWP No. 14451 of 2010 was
filed by M/s Uddar Gagan Properties Private Limited –
respondent No. 11 along with some land-owners
represented it, in the 2nd case also the said
Builder-cum-Developer was one of the writ petitioner
and the other farmers were also impleaded
SHRI SANJAY JAIN...”, namely, the authorised
representative of respondent No. 11. All the three
writ petitions were, thus, filed by respondent No. 11
only. It is interesting to note that the learned Single
Judge in his order dated 06th December, 2010 has
said that “Two sets of replies have been filed by
respondents no. 1 and 2. While admitting the entire
factual averments made in the writ petitions
regarding the ownership of the acquired land by the
petitioners, their applications for grant of licence and
release of the part of the land and grant of licence to
the petitioners in CWP No.14452 of 2010 and 14451
of 2010, it is stated that possession of the land
where the Rabi crop was standing could not be taken
over by the Estate Officer, HUDA, Rohtak/Land
Acquisition Collector, Hissar as the land owners were
granted time upto 30.4.2005 at their request.
Subsequently, the matter was referred to the Deputy
Commissioner, Rohtak who vide his report dated
17.3.2006 confirmed the possession of the land
owners upto October, 2005. Thereafter on account of
status quo issued by the High Court in CWP Nos.1893
and 1894 of 2006, possession of tracts of land for
which licence was granted could not be taken over
from the petitioners”. [Emphasis applied].
[74]. It may be seen that 'the public purpose' of
acquisition, the factum of taking possession of the
acquired land on 06th April, 2005, non-existence of
any Government policy or a provision in the Statute
9Page 10
to grant Licence for an acquired land etc. etc. were
not disclosed before the learned Single Judge. Only
selective information convenient to the cause of
respondent No. 11 was brought on record. There is a
serious doubt on the nature of contest given by the
official respondents who took it like a 'friendly
match'. The collusion between respondent No. 11
and the senior functionaries is writ large in the fact
that despite unambiguous opinion given by the
Advocate General, Haryana that it was a fit case to
file Letters Patent Appeal, the Department secured a
contrary opinion from the office of LR, Haryana and
allowed the judgment of learned Single Judge to
attain finality. In this entire process, the
Constitutional Office of the Advocate General was
also belittled. We fail to understand as how the
opinion given by the Advocate General could be
over-ruled by securing a tailor-made opinion from an
inferior authority.
[75]. The names of landowner-farmers were kept at
the forefront in the Government files or before the
Court to hide the identity of respondent No. 11
wherever possible and to give a misleading
impression as if the real beneficiaries of State
largess were the small time landowners. The fact of
the matter is that the farmers have not got even an
inch of the released land, which has been formally
transferred in favour of respondent No. 11 through
the Sale Deeds executed in January, 2007, again by
General Power of Attorney holders of the farmers,
namely, authorised representatives of respondent
No. 11. The only irresistible conclusion can be that
the farmers stood ousted from the scene since
March/April, 2005 and it was the 11th respondent
who masqueraded for them, otherwise where was
the occasion for the landowners to execute Sale
Deeds on 25th January, 2007 through the Power of
Attorneys obtained from them in March, 2005?
xxx xxx
[79]. The Vendors and the Vendee both had full and
informed knowledge of the fact that the transacted
land had since been acquired and Award also
1Page 11
passed. The Vendee was aware of the fact that the
Vendors did not possess a clean title, yet the Sale
Deeds were presented and got registered, after
about two years of the passing of the Awards, on
06th April, 2005. Every such transaction in respect of
the acquired land was indeed null and void having no
existence in the eyes of law.
[80]. ………… Secondly, it is not a case of challenging
the Sale Deeds for the breach of any bilateral terms
and conditions or on the conventional grounds where
a question of fact has to be proved. The incidental
relief to declare the Sale Deeds as null and void is an
offshoot of the broader issues raised by the
petitioners including those hovering around the
systematic colourable exercise of power by the State
apparatus. A Constitutional Court while performing
its solemn duty as a Trustee of the fundamental
rights of the citizens shall thus be well within its right
to lift the veil and unmask the private object behind
an acquisition carried out in disregard to the
mandate of Articles 14 and 300-A of the Constitution.
xxx xxx
[82]. Power of land acquisition vested under the
1894 Act could be invoked only in public interest and
not for creating land-bank
in favour of respondent No. 11 through distress
sales. The State can not force the landowners to
surrender their title in favour of and at a price to be
dictated by a private beneficiary. The notified public
purpose was only a ruse to enable respondent No. 11
to purchase the land at the lowest possible price for
maximizing the profiteering. It is so well settled that
an action to be taken in a particular manner as
provided by a Statute, must be taken, done or
performed in the manner prescribed or not at all. The
rule laid down by the Privy Council in Nazir Ahmad
Vs. King Emperor, AIR 1936 PC, 253 that “where a
power is given to do a certain thing in a certain way,
the thing must be done in that way or not at all”, has
been approved and further expanded by the Apex
Court in a catena of decisions. When an action is
taken in furtherance of explicit power given by a
11Page 12
Statute, the legitimacy of invoking such power shall
depend entirely upon the
extent of achieving the net-end object for which the
Statute enables the exercise of such power. These
principles have been violated in whole-some in the
case in hand as the pretended public purpose was
neither intended nor was finally achieved.
[83]. There is too much hype created by the official
respondents with reference to the legislative Scheme
of the 1975 State Act. At the cost of repetition, it
may be mentioned that applications for the grant of
Licences were moved mostly in March/ April, 2005
though respondent No. 11 continued dropping in
such applications in the year 2006 also. All the
Licences were issued after passing of the Award in
April, 2005 and before the execution of Sale Deeds in
January, 2007. The Builder did not own an inch of
land, yet every licence was addressed to it and sent
with a specific enclosure that respondent No. 11 was
the sole owner of the licensed and released land. The
issuance of licence, in our considered view, was a
fraud played on the policy behind the 1975 Act. We
say so for the reasons that Section 2[d] of the Act
defines 'colonizer' to mean “an individual, company
or association, body of individuals, whether
incorporated or not, owning land for converting it
into a colony.....”. Section 2[k] defines the expression
'owner' to include a person in whose favour a lease
of land in an urban area for not less than 99 years
has been granted. Section 3[1] mandatorily requires
that “any owner desiring to convert his land into a
colony” can make an application for the grant of
Licence. Sub-Section [2] obligates the Director to
inquire into “title to the land”. Similarly, Rule 3 of the
Haryana Development and Regulation of Urban
Areas Rules, 1976 requires an owner of the land
desirous of setting up a colony to apply along with
requisite documents including “copy or copies of all
title deeds...”. A mis-directed reliance has been
placed on Rule 17 of these Rules which says that
“the Colonizer shall not transfer the licence granted
to him under Rule 12 to any other person without the
prior approval of the Director”. It has already been
dealt with in extenso that the true owners were left
1Page 13
with no choice but to enter into the Collaboration
Agreements with the Builder, who was so sure of
obtaining the licences and getting the land released
that he ousted the owners from the consequential
benefits of the licences in 2005 itself by paying them
“entire sale consideration” for the land which had
already vested in the State free from all
xxx xxx
[87]. Repeated reference to Section 48[1] of the
1894 Act is also equally misconceived and
misplaced. The Full Bench in Ram Murti Sarin's case
[supra] says that if possession has not been taken by
the Land Acquisition Collector as per the Award
announced by it, the State Government can allow the
proceedings to lapse without any notification under
Section 48 of the Act, if it is no longer interested in
acquisition of land. Had the
official respondents followed the law in letter and
spirit after arriving at the conclusion that the State
was not interested in acquisition of land, the one and
only consequence ought to have been to allow the
acquisition to lapse and resultant return of land to
the original owners. Here is a case where artificial
reasons were created, the records were fudged with
the aid of the Deputy Commissioner, Rohtak, to
mislead the fact that the possession of acquired land
was not taken while announcing the Award. The
responsible officers of the State Government, in their
anxiety to help out respondent No. 11, have
completely overlooked the interest of landowners or
of the General Public to whom thousands of plots
could have been allotted at a fairly low price through
the aegis of HUDA.
xxx xxx
[89]. The objection of delay or latches raised against
the petitioners merits rejection at-least on two
counts. Firstly, it is decipherable from the
Government record that the process of granting
licences or releasing the land commenced in the
1Page 14
year 2006 and continued till the year 2011. In fact,
till the last date of hearing, the official respondents,
for the reasons best known to them, did not deem it
necessary to bring it on record as to how much land
[out of 422.44 acres] has since been released in
favour of respondent No. 11. It, however, appears
from the submissions made at the bar that a major
chunk of land has now gone into the hands of
respondent No. 11 in due course of time except a
few patches where the State/ HUDA intends to
develop 'public utilities' to facilitate the said
respondent. Secondly, no development whatsoever
has been carried out till date and it was informed
that the land is still lying in its original form without
any construction having been made. (emphasis
added) ”
6. It is clear from the findings recorded by the High Court
that the transfer of title of land, covered by the notification
for acquisition, in favour of a builder, who sought release of
land for setting up of a colony, was clearly to defeat the law
and the notified purpose of acquisition. It was observed that
on this undisputed factual position, the plea of alternative
remedy of seeking annulment of sale deed by a suit could not
be entertained. Relief of setting aside of sale transaction was
incidental and consequential to the finding of illegal exercise
of power to release the land covered by acquisition
proceedings to the builder who was not the original owner. It
became necessary to undo the illegality and systematic
fraud. It was undisputed that the builder did not own an inch
1Page 15
of land prior to acquisition and it was only the land
acquisition proceedings coupled with the capacity of the
builder to seek licences for colonization of land covered by
acquisition which enabled it to acquire title. Contrary to the
legal mandate of requirement of a colonizer owning of its own
land, ownership of land could not be allowed to be acquired
by the sword of acquisition on the head of the original
7. The High Court has observed that circumstances of the
situation which created helplessness for the farmers to
surrender their rights and unholy nexus of the builder with
the officers of the Government resulted in constitutional
guarantee of equality and fair play being defeated and
acquisition power being abused to transfer the land to the
builder in the name of acquisition by the State for public
8. On the aspect of moulding the relief, following operative
order was passed :-
[94]. In the light of the discussion and for the
reasons stated above, we allow these writ petitions
in the following terms:-
1Page 16
[i] Since the subject acquisition neither intended
nor has achieved its 'public purpose', the
notifications dated 11th April, 2002 and 8th April,
2003 issued under Sections 4 and 6 of the Land
Acquisition Act, 1894 are hereby quashed in
entirety. As a result thereto, the subsequent
awards passed on 06th April, 2005 can not
sustain and are consequently quashed;
[ii] As a necessary corollary, the licences
granted to respondent No. 11-
Builder-cum-Developer dated 12th June, 2006,
1st August, 2006, 1st September, 2006 or issued
thereafter, even if not not brought on record but
pertaining to the acquired land, are hereby
declared null and void and quashed;
[iii] Consequently, the release orders like dated
12th June, 2006 [P-28 and P-29] or any such like
release orders pertaining to the land acquired
vide the notifications dated 11th April, 2002 and
08th April, 2003, passed in purported exercise of
powers under Section 48[1] of the 1894 Act are
hereby quashed;
[iv] As a result of the declaration and directions
issued at [ii] and [iii] above, the Sale Deeds
executed in favour of respondent No. 11 on
different dates in January, 2007 in respect of the
acquired land are declared to be null and void
and non-existent in the eyes of law;
[v] Those landowners who have neither
received compensation nor entered into any
Collaboration or Agreements to Sell with
respondent No. 11, shall be restored with the
possession of their respective land forthwith.
[vi] Those landowners who have received
compensation but have not entered into any
Collaboration or Agreements to Sell with
respondent No. 11, shall also be returned their
respective land subject to their deposit of the
entire amount of compensation along with
simple interest at the rate of 9% as prescribed
under Section 28 of the Land Acquisition Act,
1Page 17
1894. The possession shall be restored in their
favour within one week of refund of the
compensation amount;
[vii] Those landowners who have entered into
Collaboration or Agreements to Sell with
respondent No. 11, shall be given option to
return the Sale Consideration received by them
from respondent No. 11 along with simple
interest @ 7% per annum within a period of
three months from the date of receipt of
certified copy of this order. If any one of them
has received compensation from the State,
he/she shall be required to refund the same in
the manner as laid down for the landowners
falling in direction No. [vi] above. On doing so,
the possession of their acquired land shall be
restored to them within one week;
[viii] If any of the landowners falling in Category
[vii] above fails to return the sale consideration
to respondent No. 11 or the compensation
amount to the State, title of his/her land to that
extent, shall stand transferred in favour of
respondent No.11;
[ix] If the landowners fail to return the
consideration amount to the private Builder as
directed above and Respondent No. 11 perfects
its title qua their land, the State Government
would be free to grant Licence to the said
respondent to the extent of such land, if so
permissible under the 1975 Act;
[x] Respondent No. 11 shall be entitled to seek
refund of the Licence fee, CLU or other statutory
charges from the State, within a period of six
months but without any interest, to the extent
and for the land which shall stand released in
favour of the original owners;
[xi] There shall be cost of `50,000/- [Fifty
Thousand] in each case on respondent No. 11
which it shall deposit within one month with [i]
Mediation and Conciliation Centre and [ii]
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Lawyers' Welfare Fund of High Court Bar in
equal share.”
9. When the matter first came up for hearing before this
Court, reliance was placed on an order of this Court dated 5th
August, 2011 in SLP (Civil)……/2011 (CC 12415 of 2011),
titled State of Haryana versus Sindhu Education
Foundation granting stay of the High Court judgment. The
order of this Court in the said case has been referred to in the
impugned order also. The said petition has been
subsequently dismissed by this Court on 7th September, 2015
(being SLP (Civil) No.22354 of 2011). This Court, while
issuing notice, granted stay of operation of the impugned
judgment. However, vide order dated 13th March, 2015, it
was clarified that stay could not mean that any further
development could be effected on the property. However,
certain interlocutory applications have been filed wherein
applicants claim to have purchased the plots on and after 6th
February, 2012, during pendency of the litigation to support
the appellant-builder. Applications have also been filed by
some land owners who were not party before the High Court
to support the impugned judgment. Even though persons
who claimed to have purchased the plots during pendency of
1Page 19
litigation may have no right whatsoever to oppose the writ
petitions, we have heard counsel representing them only with
a view to consider the diverse view points presented before
the Court.
10. We have heard Shri Shyam Divan, learned senior
counsel for the builder, S/Shri Harish N. Salve and Dr. Rajeev
Dhawan, learned senior counsel, apart from other counsel,
also appearing for the builder or the purchasers and Shri K.K.
Venugopal, learned senior counsel for the land owners and
other counsel for the land owners. We have also heard
learned counsel for the State. The record has also been
produced by the State.
11. The contentions on behalf of the appellants are that
there is nothing wrong with the policy of the State to permit
colonization by a private builder and the said policy is not
under challenge. The policy is permitted by the 1975 Act and
the High Court had issued a direction to consider the case of
the appellant as per the said policy. In spite of the award, the
possession continued with the land owners and the power
under Section 48 of the 1894 Act was validly exercised for
releasing the land. Irrespective of the merits, the petition
1Page 20
was liable to be dismissed on the grounds of delay and
latches and also on the principle of approbate and reprobate
since the land owners had executed sale-deeds in favour of
the builder and taken benefit of collaboration from the
builder. It was also submitted that the operative direction in
the impugned judgment giving options to the land owners “to
retain the land or to receive the compensation paid to them
by the builder with interest or to refund the compensation
collected to the State”, will result in a truncated colony being
set up which will be contrary to the concept of integrated
development. It was also submitted that the High Court has
wrongly assumed that there was no policy applicable to the
present situation permitting colonization. Reliance was also
placed on policy dated 26th March, 2000. Shri Divan pointed
out that as per report of the Chartered Accountants, the
builder had spent a sum of Rs.64.58 crores on payments
made to the original land owners and to the Government
towards stamp duty and registration charges. The builder
has also spent on development and construction, EDC/IDC,
financial cost, licence/scrutiny fee/conversion charges,
office/admin and other expense amounting to a sum of
2Page 21
Rs.174.62 crores. The builder had collected a sum of
Rs.114.91 crores from third parties towards sale
consideration of carved out plots/units in residential plotted
colony at Sector 27 (part in Section 26 & 28) Rohtak,
Haryana. Thus, the builder had already spent approximately
Rs.100 crores in excess of the amount it had received and will
not be able to recover the same from the land owners if the
land is to be returned against consideration collected from
them. Dr. Dhawan added that the issues of undue influence
could be decided only in a suit. The finding of mala fide was
recorded unmindful of the standard of the proof required and
requirement of impleading party against whom allegation
was made. In any case, the relief could be moulded having
regard to the transactions which had already taken place
laying down law prospectively. It was also submitted that
after acquisition, the HUDA could dispose of the acquired
land even without carrying out any development thereon.
Acquisition could not be challenged after the award. Bona
fide purchasers were entitled to restitution. Shri Salve
submitted that as against the problem of farmers on account
of the forcible acquisition, equally serious problem of urban

middle-classes for living space needs to be considered. Once
acquisition is quashed, the validity of sale by farmers to the
builders should be left to be gone into in private law remedy
where equity could be balanced. If the acquisition is valid
and the order of release under Section 48 is quashed, the
land has to revert to the State. In this fact situation, the
impugned order could not be justified. In absence of
cross-examination and weighing of equities, the land could
not be returned to the land owners who have already
received the compensation or the sale consideration. The
alleged fraud and undue influence or coercion may render a
contract voidable but not void and the civil court has to
balance equities for setting aside such a sale. Learned
counsel for the State submitted that the object of the policy
to permit colonization by a private builder is to prevent
haphazard constructions. The policy helped integrated fast
development and enabled the State to impose restrictions for
reserving houses for weaker sections. It was submitted that
the roads have already been constructed and in case release
of land in favour of the builder was to be quashed, the land
should revert to the HUDA.

12. Opposing the above submissions, Shri K.K. Venugopal,
learned senior counsel of the land owners submitted that the
facts speak for themselves. The builder has emerged on the
eve of making of the award to make huge profits by
exploiting helplessness of land owners facing imminent threat
of losing land under the notifications. The builder obtained
power of attorney in favour of its nominee and the land
owners signed documents finding no other way to save their
land irrespective of illegality of the State action. The builder
could have taken the risk of investing money in illegally
dealing with the land covered by acquisition only if it had
assurance from the authorities that the land will be released
to it even though law did not permit it. Thus, creating a
situation which compelled the land owners to surrender their
rights in favour of a builder was abuse of the power of
acquisition. In such a situation, the land owners had no
means to know the name of the officers or their precise role
in advancing the illegality. Undisputed facts unequivocally
indicate clear fraud and abuse of power. Relief could be
moulded by overlooking technicalities to advance justice. It
was also submitted that the State Government itself had

ordered CBI investigation in some identical cases as also
noted in the order of this Court dated 6th October, 2015 in SLP
(Civil) No.5725/2015 (Rameshwar & Anr. vs. State of Haryana
& Ors.).
13. We have given serious thought to the rival contentions.
We have found no reason whatsoever to disagree with the
finding recorded by the High Court that present case is a
gross abuse of law on account of unholy nexus of the
concerned authorities and the builder to enable the builder to
profiteer. The land could either be taken by State for a
compelling public purpose or returned to the land owners and
not to the builder.
14. There could be no objection to acquisition of land for a
compelling public purpose nor to regulated development of
colonies, but entertaining an application for releasing of land
in favour of the builder who comes into picture after
acquisition notification and release of land to such builder
tantamounts to acquisition for a private purpose. It amounts
to transfer of resources of poor for the benefit of the rich. It
amounts to permitting profiteering at the cost of livelihood
and existence of a farmer. This is against the philosophy of
2Page 25
the Constitution and in violation of guaranteed fundamental
rights of equality and right to property and to life. What
cannot be done directly cannot be done indirectly also.
15. This apart, if State is to be party to directly or indirectly
select beneficiary of State largess – which in present fact
situation the State certainly is – objectivity and transparency
are essential elements of exercise of public power which are
required to be followed. It is patent that the State has
enabled the builder to enter the field after initiation of
acquisition to seek colonization on the land covered by
acquisition. In absence of State’s action, it was not possible
for the builder to enter into the transactions in question
which was followed by withdrawal from acquisition. But for
assurance from some quarters, the builder could not have
made investment nor land owners could have executed the
transactions in question. Such fraudulent and clandestine
exercise of power by the State is not permitted by law. This
is in violation of Public Trust Doctrine laid down inter alia in
Reliance Natural Resources Ltd. versus Reliance Industries
, Centre for Public Interest Litigation versus UOI2
; Special
(2010) 7 SCC 1;
 (2012) 3 SCC 1

Reference 1 of 2012 U/A 143(1) of Constitution of India3
Manohar Lal Sharma versus Principal Secretary4
16. Reliance on Policy dated 6th March, 2000 is
misconceived. The subject of the said document is :
“Release of and from acquisition owned/ purchased
by the developers before the issue of notification
under Section – 4 of the Land Acquisition Act, 1894
but submitted application for grant of permission for
change of land use for starred hotels/ licence for
setting up of residential colonies thereafter.”
17. Thus, the policy is applicable only to release of such
land from acquisition as is owned/ purchased by the
developers before the issue of notification under Section 4 of
the Land Acquisition Act, 1894. This condition was required
to be strictly complied with and no person other than original
owners prior to acquisition could directly or indirectly avail of
the said policy. Even a bona fide error could not justify a
patent illegality. In the present case, it is undisputed case of
the builder itself that it did not have even an inch of land
before the notification in question. It is also patent that the
application for grant of licence, though purportedly made by
(2012) 10 SCC 1
(2014) 9 SCC 516

the land owners, has in fact been made by the builder.
Reference to the order of the High Court dated 25th March,
2008 in Civil Writ Petition No. 4767 of 2008 filed by the
builder is of no avail to the appellant as it is only a direction
to consider the claim of the writ petitioners in accordance
with law. The validity of claim of the builder has not been
adjudicated upon in the said order. Even in order dated 6th
December, 2010 in Civil Writ Petition No. 14452 of 2010 and
other connected matters, there was no consideration or
adjudication of the issue with regard to the validity of release
of land in favour of a builder who came into picture after the
acquisition notification, which took away the basis of the
claim for any relief.
18. While it is true that a belated petition cannot be
entertained under Article 226 of the Constitution, it is well
settled that this is only a rule of practice based on sound and
proper exercise of discretion and not a jurisdictional bar.
Exercise of discretion to quash an illegal action based on
fraud or abuse of law even belatedly may not be liable to be
interfered with under Article 136 of the Constitution. When
the land sought to be acquired for a public purpose is allowed

to be transferred to private persons, any administrative
action or private transaction could be held to be vitiated by
fraud Royal Orchid Hotels v. G. Jayarama Reddy (2011) 10 SCC 608, para 22
. There is no legal sanction for such action, as already
19. It is well settled that use of power for a purpose
different from the one for which power is conferred is
colourable exercise of power. Statutory and public power is
trust and the authority on whom such power is conferred is
accountable for its exercise. Fraud on power voids the action
of the authority .State of Punjab v. Gurdial Singh (1980) 2 SCC 417, Greater Noida Industrial Development Authority v. Devendra Kumar (2011) 12 SCC 375, para 39
 Mala fides can be inferred from
undisputed facts even without naming a particular officer and
even without positive evidence  State of Punjab v. Ramjilal (1970) 3 SCC 602, pr 9-10; Express Newspapers (P) Ltd. V. UOI
xx(1986) 1 SCC 133, pr. 119-120
 In the present case, abuse
of power in dealing with the matter by the functionaries of
the State is more than clear as rightly found by the High
Court. Challenge to acquisition may not be confined to those
who have not accepted the amount of compensation or
consideration. Once such order/transaction is vitiated there
could be no estoppel on the ground that

compensation/consideration has been received, as the land
loser has little choice in the face of acquisition9
20. Acquisition of land is a serious matter. It may result in
depriving a tenure holder not only of his property but also his
profession, livelihood and social security10. Even plight of
investors in plots/ flats in land covered by acquisition or
litigation cannot be a ground to ignore illegal actions of
depriving a farmer of his land11. As already observed, and is
settled law, State’s power of compulsory acquisition cannot
be used to enable a private entity to acquire title even if
private person offers more compensation than the State.12 It
is also well settled that no legitimacy can be conferred to an
abuse of power to advance a private purpose by invoking
doctrine of prospective overruling13
21. We are also conscious of the legal position that under
the scheme of the 1894 Act, the land losers get
compensation as on the date of Section 4 notification. Any
transfer of title thereafter for release of land to a person who
(2011) 12 SCC 375, para 43.
10 ibid, para 45
11 ibid, para 47
12 State of Bihar v. Kameshwar Singh, AIR (1952) SC 252, pr. 45, 52; Chairman Indore Vikas
Pradhikaran v. Pure Industrial Coke (2007) 8 SCC 705, pr 53-56; Devinder Singh v. State of Punjab
(2008) 1 SCC 728
13 Bangalore City Cooperative v. The State of Karnataka (2012) 3 SCC 727, para 41
2Page 30
is not owner on the date of notification under Section 4 can
be viewed as abuse of power under Section 48 of the Act.
Moreover, no such transferee can claim any right other than
compensation. While notification under Section 4 of the 1894
Act may not prevent creation of an encumbrance on the land,
such encumbrance does not bind the Government14
22. In view of the above, we do not find any ground to
interfere with the finding recorded by the High Court that
there was an abuse of power in releasing the land in favour of
the builder. Once it is found that action of the State and the
builder resulting in transfer of land from land owners to the
builder was without any authority of law and by colourable
exercise of power, none of the contentions raised by the
builder could accepted15. We may consider the issue of
moulding relief separately but the builder cannot be allowed
to retain the land acquired illegally. Undoing of such illegal
actions would clearly be in the interests of justice. The wrong
has to be remedied.
14 (1995) 2 SCC 528, [Gyan Chand v. Gopala & Ors.]; (1995) 5 SCC 335 [Mahavir & Anr. v.
Rural Institute, Amravati & Anr.]; (1996) 3 SCC 124 [The U.P. Jal Nigam, Lucknow Thr. its
Chairman & Anr. v. M/s. Kalra Properties Pvt. Ltd., Lucknow & Ors.]; (2008) 9 SCC 177 [Meera
Sahni v. Lieutenant Governor of Delhi] and (2014) 15 SCC 394, pr. 14-15; (2012) 12 SCC 133 pr.18
 (2007) 9 SCC 304
3Page 31
23. We find that the operative part of the order passed by
the High Court needs modification. The entirety of the
acquisition need not be quashed. What needs to be quashed
is the abuse of power and illegal consequential actions which
took place after the acquisition notifications. The High Court
has rightly observed that the notified public purpose was
valid but the subsequent events resulted in illegality. The
High Court also rightly held that it will be inappropriate to
release the land in favour of the builder by permitting the
builder to take over the property and granting licence for
colonization on the land covered by acquisition16. Further,
view of the High Court that doctrine of severability cannot be
invoked and the entire acquisition was liable to be quashed
needs modification in the facts of this case.
24. In view of the above, it is not necessary to refer to all
the decisions cited on behalf of the appellant on the question
that the court may not entertain a belated petition or may
apply the doctrine of promissory estoppel or approbate and
reprobate or insist on strict proof of mala fidies or to confine
16 Para 69 of the impugned judgment which has already been quoted.
3Page 32
the relief to an individual who approaches the court on facts
which speak for themselves.
25. Once release of land under acquisition is found to be
mala fide or arbitrary exercise of power, acquisition of
released land stands revived17. The operative direction of the
High Court to quash the acquisition to the extent it has
neither been challenged nor concerns the land transferred to
a private builder by abusing the power of acquisition or on
account of any extraneous considerations does not appear to
be justified. Similarly the direction of permitting the builder
to retain the land of those land owners who are not able to
refund the sale consideration received by them may permit
the builder to illegally retain the land. Moreover, it may not
be practicable in the present fact situation to restore the land
to the land owners but they can be duly compensated while
restoring the land to the State to use it for notified public
purpose. Person whose land is taken for houses for others
cannot be rendered homeless and unemployed. This will be
sheer exploitation. In view of the conduct of the builder,
agreeing with the view of the High Court, we do not propose
 (2014) 15 SCC 394, para 14
3Page 33
to allow any interest to the builder while permitting refund/
reimbursement to it. From the impugned judgment there is
nothing to show that the developments which are now relied
upon had taken place on the date of filing of the writ petition.
It has been specifically held in para 89 of the impugned
judgment that no development had taken place till the
judgment of the High Court. Any subsequent transactions or
development are of no consequence for rights of parties.18
Any subsequent transactions entered into by the builder
cannot be taken into account and are hit by the principle of
lis pendens. In any case it was for the builder to inform the
third parties to whom the plots have been sold, that the land
was under litigation. If the third parties have purchased the
land knowing fully about the litigation, they have clearly
taken risk and their remedy will be only against the builder. If
pendency of litigation was suppressed, the third parties can
take their remedies against the builder. Without prejudice to
their said private remedies, the court may try to balance
equities to the extent possible. We are also of the view that if
the authorities have proceeded to entertain applications for
18 ibid, pr 11
3Page 34
licence to give undue benefit to the builder by way of helping
him to take over land under the cloud of acquisition, it may
call for action against those who have misused their power
and to find out the considerations for such misuse.
26. Land is scarce natural resource. Owner of land has
guarantee against being deprived of his rights except under a
valid law for compelling needs of the society and not
otherwise. The commercial use of land can certainly be
rewarding to an individual. Initiation of acquisition for public
purpose may deprive the owner of valuable land but it cannot
permit another person who may be able to get permission to
develop colony to take over the said land. If the law allows
the State to take land for housing needs, the State itself has
to keep the title or dispose of land consistent with Article 14
after completion of acquisition. If after initiation of
acquisition, process is not to be completed, land must revert
back to owner on the date of Section 4 notification and not to
any one else directly or indirectly. This is not what has
27. As already observed, the power to release land from
acquisition has to be exercised consistent with the doctrine of
3Page 35
public trust and not arbitrarily. Functioning of a democratic
government demands equality and non-arbitrariness. Rule of
law is the foundation of a democratic society. 19
28. However, having regard to the irreversible situation
which has been brought about, though in normal
circumstances land may have reverted to land owners, the
relief will have to be moulded .
29. Keeping the above in mind, we are of the view that ends
of justice will be served by moulding the relief as follows:
i) Notifications dated 11th April, 2002, 8th April, 2003
and awards dated 6th April, 2005 are upheld. The
land covered thereby vests in HUDA free from all
encumbrances. HUDA may forthwith take
possession thereof.
(ii) All release orders in favour of the builder in
respect of land covered by the Award in exercise
of powers under Section 48 are quashed.
 NOIDA Entrepreneurs Assn. v. NOIDA (2011) 6 SCC 508, prs. 40-41
3Page 36
iii) Consequently, all licences granted in respect of
the land covered by acquisition will stand
transferred to HUDA.
iv) Sale deeds/ other agreements in favour of the
builder in respect of the said land are quashed.
The builder will not be entitled to recover the
consideration paid to the owners but will be
entitled to reimbursement as indicated
hereinafter. Creation of any third party rights by
the builder also stand quashed.
v) The sale consideration paid by the builder to the
land owners will be treated as compensation
under the award. The land owners will not be
required to refund any amount. The land owners
who have not received compensation will be at
liberty to receive the same. The land owners will
also be at liberty to prefer reference under Section
18 of the 1894 Act within a period of three
months, if such reference has not been earlier
3Page 37
vi) The builder will be entitled to refund/
reimbursement of any payments made to the
State, to the land owners or the amount spent on
development of the land, from HUDA on being
satisfied about the extent of actual expenditure
not exceeding HUDA norms on the subject. Claim
of the builder will be taken up after settling claim
of third parties from whom the builder has
collected money. No interest will be payable on
the said amount.
vii) The third parties from whom money has been
collected by the builder will be entitled to either
the refund of the amount, out of and to the extent
of the amount payable to the builder under the
above direction, available with the State, on their
claims being verified or will be allotted the plots at
the price paid or price prevalent whatever is
higher. No interest will be payable on the said
viii) The State shall give benefit of “Rehabilitation and
Resettlement of Land Acquisition Oustees” policy
3Page 38
of the State/ HUDA to the land owners. Area so
required shall be reserved out of the acquired land
ix) The State Government may enquire into the
legality and bona fides of the action of the persons
responsible for illegally entertaining the
applications of the builder and releasing the land
to it, when it had no title to the land on the date of
the notification under Section 4 of the 1894 Act
and proceed against them in accordance with law.
x) This Judgment be complied with within one year.
xi) Quarterly progress report of the action taken in
pursuance of this judgment be filed by the State in
this Court and final report of compliance may be
filed within one month after expiry of one year
from today for such further direction as may
become necessary.
30. The matters will be treated as disposed of except for
consideration of the report of compliance to be submitted by
the State Government.
3Page 39
MAY 13, 2016.
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